In an effort to be more environmentally conscious, the United States government is dolling out various rebates and tax credits to consumers who purchase more earth friendly, energy efficient appliances. While the aim of the rebate program may be admirable, economists from the University of Delaware say taxpayers will lose a significant portion of the $300 Million they are contributing to the federal government's appliance rebate program and the energy-saving program could actually increase energy usage. Their analysis is published in the 1st Quarter 2010 issue of the Milken Institute Review.

Focusing on refrigerators, economists added benefits to the consumer and the environmental improvements that come from the program, and found for every $100 spent by taxpayers for refrigerators, $6 is lost. The rebates, which range from $50-$200, could be lowered to $30 and would result in the same consumer response, they wrote. Abrams and Parsons say while Cash for Clunkers wasted $825 million, this new program's loss will be significantly smaller but is similarly ill conceived.

The authors further explain that the program could result in more energy use because consumers will buy new refrigerators but keep the old for extra capacity.  Unlike the Cash for Clunkers program, the appliance program does not require salvaging older models

Citation: Burton A. Abrams, George R. Parsons, 'Cash for Clunkers: The Uneasy Case for Subsidizing Energy Efficiency', Milken Institute Review, 1st Quarter 2010